Question

The initial diagram has two panels.The left graph depicts a perfectly inelastic demand curve. The right graph depicts a relatively flat sloped demand curve. The initial equilibrium in each graph is labeled point A. We will impose a $3 per unit tax in the left graph, and a $4 per unit tax in the right graph.

Make a copy of the graph, then follow the below instructions to draw the graph:

• 1. In the left graph $3 above and parallel to the original supply curve, draw a new supply curve, put a black dot at the new equilibrium and label it as point B.

• 2. Draw a vertical arrow between the two supply curves, and label it as a $3 Tax.

• 3. Shade the rectangle representing the rectangle for the tax burden on the buyer.

• 4 In the right graph $4 above and parallel to the original supply curve, draw a new supply curve, put a black dot at the new equilibrium and label it as point B.

• 5. Draw a vertical arrow between the two supply curves, and label it as a $4 Tax.

• 6. Shade the rectangles representing the rectangle for the tax burden on the buyer, and the seller, respectively.

S2 S2 S1 8 9quantity/time 1 2 3 4 5 6 7 8 9 QUESTION 4 In the right hand graph the seller burden is O $0 O $4 O $10 O $12 QUESTION 5 In the left hand graph the total tax collected is O $0 O $4 O $15 O $12 QUESTION 6 In the right hand graph the total tax colected is O $0 O $4 O $10 O $12 O $16

Answer 1

Answer -4 Correct option is $4.

Producer Burden is 4(3-2) = 4

Answer-5 Correct option is $15

Total tax collected is 5(5-2) = 15

Answer-6 Correct option is $16

Total tax collected is 4(6-2) = 16.

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